Monday, July 13, 2009

In this posting, I'll tell you why the PAP will never ever establish a minimum wage.

In this recession, the US unemployment rate soared to 9.4%....and Singapore's resident unemployment rate is 4.9%. These unemployment numbers are however not an apples to apples comparison. Before I drill into the numbers lets start with a story.

In the 1980s recession, one of my seniors who was about to ORD took leave to attend an job interview. He was a poly graduate. A few days later he received the job offer but instead of looking happy, he had this frown on his face. "I can't believe it but the pay is $400 a month!", he said. Before the recession, people with his qualifications were paid $750 a month. He took the job anyway because he couldn't get another one. At that time, it was possible for a single person to live on $400 a month. The moral of the story is there is almost always a job available when you are willing to accept any pay. If you're willing to work for free, send me a mail and I'll get you a job and you don't have to be unemployed. It is completely meaningless to talk about employment level alone without talking about wages. When you compare the umemployment rate of a country with minimum wages with one without a minimum wage, you're not comparing apples to apples.

The minimum wage in the US depends on where you live but the average is US$7 per hour. If a person works full time, say 8-6pm every weekday, the month salary is US$1400 or S$2000.

See Obama has a more difficult task creating jobs in his economy because of the minimum wage - he has to create jobs that pay better than the minimum wage. All our leaders need to do to get the unemployment rate down is to tell the people not to be 'fussy' about salary. In other words, you can say Singaporeans always have employment as it is just a matter of accepting whatever pay that is offered.

However, what good is a job if you do make enough to feed your family? If our economic system is equitable, a person working full time should be able to raise a family, afford a home have and all the basic necessities. When you have people working full time and not able to make ends meet, you have poverty. To make sure people are paid decent salaries, many developed countries set a minimum wage.

The frequently cited problem with a minimum wage is that it will result in higher unemployment. The above graph illustrates the problem. The way to keep unemployment from becoming higher is to make sure your equilibrium point is close to the minimum wage. Govts can do this by having a robust economy with well paying jobs and making sure the cost of living is contained. With massive imported labor, the Singapore govt has caused the supply curve of labor to shift to the right. This moved our equilibrium point further down from where our minimum wage is. Also, the cost of living increase over the years means our minimum wage has been going up....moving further form the equilibrium point.

The reason why the PAP govt does not set a minimum wage is simple. Unemployment will escalate if they do that. What this means is a large number of Singaporeans are employed at wages way below what they need to live decently. We see this from the stats - 20% of the population make something like $1300 or less.

Being able to establish and enforce a minimum wage says a lot about a govt. If they have created a system in which people who work full time jobs can make a decent salary, setting a minimum will not be problematic. If a govt creates an economy that is dependent on cheap labor and cannot keep the cost of living down because of its other interests, it will never be able to set a minimum wage without creating problems for itself.

Hong Kong aims to introduce a minimum wage by early 2011 [Link]. South Korea already has mimum wage [Link]...so does Japan[Link]...so does Taiwan[Link]...and all developed western countries.

But Singapore? The govt has created a system in which we can never establish a minimum wage....because of the sheer number of people working at income levels that are so low relative to cost of living....a natural consequence of our large income gap.

Next time someone tells you things are better in Singapore because unemployment rate (among residents) is low remember that is only half the story.

What did the foreign talent did to you? they live by the same standards (and now even have less favourable environment than Singaporeans)Companies employ employment pass holders not for the pleasure of hiring more expensive workers, but because the provide better value (blame the Sinngapore education system if you need to blame someone)Companies employ cheap work pass holders because they are cost less, yeas, but all live in the same country (though, Singapore can enjoy cheaper workers thanks to Malaysia being so close)The only advantage that foreign workers have, is that they are willing to live by lower standards, to live in dormitories, not to buy LV bags they cannot afford, not to buy cars they cannot afford

During the boom years of Sg when there was industrialisation and the knowledge economy, salaries of our workers skyrocketed as compared to our neighbours.

So prices of homes were allowed to rise

When our neighbouring countries caught up, many manufacturing and other key industries move out of Sg due to our high cost structure.

Sg desperately needs to get onboard a 'new next big thing' to lift our economy and create jobs. From what we've seen so far, the planners have run out of ideas after forays into high risk ventures like the Biotech industry. Sad that our final 'casino card' has been played to little effect.

Politically, it is suicidal to ask workers to lower their pay. The next best solution to engineer a soft landing for local salaries to adjust downwards. No wonder we are seeing so many low-cost foreigners given relative easy access to local jobs.

Who are the ones who are ultimately stuck with high housing loans but declining salaries?

Minor quibble. Figure is not right. Unemployment generated is the range from min wage to equilibrium. Those on the right of equilibrium were ALREADY unemployed to begin with.

The reason why the PAP govt does not set a minimum wage is simple. Unemployment will escalate if they do that. What this means is a large number of Singaporeans are employed at wages way below what they need to live decently. We see this from the stats - 20% of the population make something like $1300 or less.

Not quite accurate. Only partially correct. Since you're pretending to be a mind reader, the KTM shall join you.

If we introduce minimum wage, how the heck is the government going to deal with the unemployed people you generate and also the previously unemployed people? Put them on dole ah? :-P Harlo??

Your supply-demand curve is also too simplistic. For the purposes of explaining your point to your readers, it probably suffices, but it does not predict how employers will react when you implement new policies NOT in their favour. The employers react in some way that the Govt didn't quite expect, the outcome would be much worse.

Being able to establish and enforce a minimum wage says a lot about a govt.

Just means that the Govt is weak and populist. You're not going to see minimum wage until the political pressure increases to a point where it becomes untenable not to introduce it and ironically, when this happens is when unemployment is so high that it really makes little difference, minimum wage or no minimum wage.

Your argument that other people are doing it means it must be right is weak. Most Western countries have had their GST-equivalents for much lower and much higher rates. Didn't see you support the GST. :-P

If they have created a system in which people who work full time jobs can make a decent salary, setting a minimum will not be problematic.

If a govt creates an economy that is dependent on cheap labor and cannot keep the cost of living down because of its other interests, it will never be able to set a minimum wage without creating problems for itself.

Any country that implements minimum wages will create problems for itself. Some Govts are willing to tackle the problems that minimum wages will generate, good for them.

We're definitely not going to be racing Hong Kong in implementing minimum wage. Why don't you see what happens for yourself when it happens?

Paiseh, just want to add that while the KTM is being a trouble maker, he might not have time to continue an online discussion here. He just spent the whole night responding to your comment on his blog. Seriously already gave you a lot of face. :-P

The KTM is really impressed with your ability to keep up with your blog during these difficult economic times. Hats off to you. :-)

A minimum wage may result in higher unemployment. The other side of things is that even so, there will be gains in total labour wages if demand for labour on the macro level is inelastic. This is also one reason for collective bargaining.

i.e. A 2% decrease in employment, but 10% increase in overall wages.

The mass influx of cheap foreign labour is not helping things either. These people come and earn our wages, suppressing them. One may say they are less picky and that they can still survive, but that is totally an unfair comparison.

They earn our wages to spend them at home, where cost of living is many times lower. Besides Malaysians, I see few of these labour have any intention to stay here for prolonged periods. The distortion caused from the huge influx of global movements of goods and labour, and the disparity in utility of currency is not explained in mainstream economics textbooks when it

---

Market distortions are not necessarily bad. I think we have been indoctrinated into believing free markets must be good. It is not. People often forget economics is about people, and improving the lives of people. Even Soros have many times warned us about the dangers of free-market fundamentalism.

Economics is not just about maximising GDP. There are many other things, including the subject of utility (it is something vague and not easily measured, but that does not mean it is unimportant). $500 to a poor mean very different things compared to $500 to a millionaire. People often forget that.

And I wonder what we pay our ministers millions for, if their understanding of economics is so rudimentary and rigid.

You know, I think i am by nature quite a right wing guy. Hard work deserves its reward, no hand outs, if u refuse to work, u deserve to starve.

BUT, underlying all this philosophy is a basic assumption. That everyone is given a fair chance. To make it big/ to starve. I think the chance of starving of a PAP minister's son is negligible. On the other hand, the chance of a cleaner's son making it as big as the minister's son, no matter how smart he is, or how hard he works is also extremely low.

Given such circumstances, I am pro Lucky. Unless we want to do some radical re ordering of society, it is our business to help the unfortunate (note the word unfortunate, not less talented, lazy, etc)....

A min. wage is not feasible. Even if the government implement it, employers will get around it by employing foreign workers and then force them into giving "cashback" e.g. employ the foreigner for $2.5k but pay him $1k in reality. We can see this scenario in play for foreigners on special passes. I read that one waitress from China is on special pass and being paid $2.5k. You believe this is her real salary?

Of course such practices are against the law but we have seen how the labour laws have been broken with little repercussion. (e.g. phantom workers, and paying workers less than what is required for their special work pass, snakeheads). I doubt PAP has the political will to go all out to catch errant employers as most of them are PAP supporters. End up the employers benefit because they can claim more salary expenses and pay less tax.The Singaporean still won't be hired.

I think the government is moving in the right direction by providing subsidized training and supplement payments to low wage workers (workfare).

But the government is not helping itself by being terribly stingy as usual when it comes to helping its own citizens. The criteria for receiving help needs to be loosen.

The government should also open up more job vacancies. Many civil servants were retrenched and recruitment was frozen in the last recession. Many depts seem to be understaffed. Enforcement especially. It seems too easy to break laws now without being caught. For example, illegal partitioning of condo units, noise pollution, illegal parking and speeding, jaywalking, littering etc. With the influx of immigrants who have no regards for our laws, we need to step up enforcement if we want to maintain our peace and order.

You do realise that single most expensive item in Singapore is housing? Foreigner workers just refuse to buy into this crazy thing On the one hand the govt has done nothing to bring the prices down, but on the other hand, the citizens have brought the prices up (Same thing with cars: Singaporeans had let the COEs go sky high, and the govt was all too happy collecting the money)

You are embarassing KTM and hampering his efforts.The recent property spike is in part fuelled by FTs (residents) who refuse to pay the crazy rents and decided to buy instead. Afterall, how are u going to track them in China\India\Sahara...

@KTM

Pls lah. Not often that Lucky comes up with an intelligent post these days. To be accurate + intelligent + populist is not easy. And your argument(s) I think belongs to the "trickle down economics" Bush era. You also must evolve lah. Obama era now. Theres really nothing wrong with dole. Helping the less advantaged to their feet. Not a sin. Wun destroy Sinkapoor one. Really.

I was taught in NTU during econs lecture that if we had a minimum wage, it would drive up the cost of doing business here, which would in turn prompt more factories to relocate to cheaper alternatives.

"I was taught in NTU during econs lecture that if we had a minimum wage, it would drive up the cost of doing business here, which would in turn prompt more factories to relocate to cheaper alternatives."

That is what Lucky Tan is telling you about. That is forget about econs and start focusing on social net.

Why do you think Obama win over McCaine ? And why do you support Obama over McCaine ?

Isn't the answer is that McCaine focus on Economic pragmatism whereas Obama focus on the fundamental issue of creating a good quality of life first over Economic pragmatism ?

How is it that Singaporean can accept and support Obama and praise him, but yet when its to applying the same measurement of Obama onto Singapore, the same group of singaporean still insist on Economic pragmatism ?

LHL is republican mah, look at his education, his background, the era he came up, hence his embrace of trickle-down economics and right wing policies and resulting in the largest income gap and social inequality ever in SG's history.

::::If we introduce minimum wage, how the heck is the government going to deal with the unemployed people you generate and also the previously unemployed people? Put them on dole ah? :-P Harlo?? ::::

Did I say the PAP can or should introduce minimum wage? The posting explains why the PAP cannot introduce minimum wage because there are too many people earning horribly low wages. The pre-conditions to do it does not exist in Singapore. Like I said it will problematic if the PAP govt introduces minimum wage.

::::it does not predict how employers will react when you implement new policies NOT in their favour:::

If they are foreign companies here for cheap labor, they will run....what else do you expect. That is why it is critical to develop home grown industries and industries that are able to pay labor wages that what it cost to live in Singapore. The fact the govt is terrified they will run if there is a minimum wage, tells you what kind of businesses are operating here.

:::Created a system? Weren't you also the one who said that everything that has gone right so far is to the credit of the people, not PAP?:::

The PAP created a badly structured economy that wouldn't have done so well if not for the fact that Singaporeans were the No. 1 workforce in the world for years running.

:::Any country that implements minimum wages will create problems for itself.:::

First enacted in Australia and New Zealand in the late nineteenth century, there is now legislation regarding minimum wage fixing in more than 90% of countries. Looks like we are the exception along with Myanmar, Nigeria and whatever....

As for Singapore creating problems for itself with minimum wage...please lah KTM isn't that what my article is about?!!! That it is problematic to implement minimum wage in Singapore.

I have been telling so many people about the minimum wage, the way CPF works, etc. Very few people actually believe me. Even my father doesn't believe me. He thinks the PAP is the best government in the world and the other countries are always trying to do us in.

Actually look no further in our own backyard.

Here I am in AU, comparing the way how the government manages the economy. I am very surprised that though I pay high tax, the benefits and the rebates (if you know how where and how to find) can reduce your tax to very very low! And when there is a surplus, it ALWAYS goes back to the people. AlWAYS.

I'm not advocating that the system is perfect. Definitely there are cracks and a minority of people have fallen through. But in the general overall, the system is healthy, there is food on the plate and you will never go hungry.

It all boils down to the high cost of doing business in Singapore. Since the mid 80's onwards the hue and cry amongst SMEs have been this.

PAP ignored it all and told SMEs to ship out to other countries if they cannot "take the heat in the kitchen" and that they were "sunset industries".

Never seen a government like that before. PAP was so enamoured of MNCs but not long after they too moved to cheaper countries like China.

Anyway according to PAP own press, tens of thousands of SMEs relocated to neighbouring states, let alone China, Vietnam and the rest.

Then LKY caustically criticised Singaporeans repeatedly for lacking entrepreneurship and hence the lack of successful local businesses. Haha. What can you expect from a old fogey like him.

And of course lah, you should know what a great entrepreneur he is especially when he had led a train of top local SMEs to China in the early 90's to invest, the most prominent and biggest project being the Suzho Industrial Park which was a rip-off by the Chinese govt.

Anyway instead of keeping business cost in control, PAP continues to escalate them in various ways - ERP charges, GST hike, Capitaland shop rental hike and levy based on turnover, COE ... .

So now let alone the issue of minimum wage, there is already the issues of unpaid overtime such as practised amongst F & B outlets, and the huge and continued influx of foreign labour to depress wages which enable businesses to survive.

What do all these say?

Businesses in Singapore are being subsidized by the people through suppressed and unpaid wages.

It reflects a market inefficiency that none but the PAP govt is responsible for.

Other developed countries do not have to resort to such cheating and wages suppression to keep their economy humming.

For PAP these are critical and with the assistance of its Ministry of Manpower which cannot be unaware of illegal labour practices like rampant unpaid overtime.

So this country operates on such doubtful economic fundamentals.

In the meantime, the elite class, some 15% of society, many of whom work for the PAP organisation like privatised hospitals, Temasek's many companies have it real good.

Their pay and bonuses are pegged to the PAP ministers which are in turned pegged to the CEO of top companies in the market.

It is a top-heavy economic system but PAP thinks it is very fine and continues to escalate it.

I think your arguments do not make much sense. It is almost like the chicken and egg issue. Which one comes first?

Obviously, PAP created the system that was being run today. What is talking you?!?! The issue is that if we have an alternative system or other ways of doing things, things might turn out differently. Alas, how would you know that another way or system work better because in reality, we could only choose one option and hypothesise the effects of another.

I was also taught that if we have a minimum wage in place, we would have higher costs. In addition, we have no resources to fall upon. However, economics is not all about dollars and senses. We also learnt about public goods and fiscal and monetary policies to achieve economic objectives. Societal concerns are part of economics because it cost much more later or in other forms. For example, public goods such as traffic lights and overhead bridges are important in a country infrastructure. Without the public goods, the economy would be in shambles in no time.

I acknowledge that minimum wage will account for higher business costs, but sometimes I wonder whether the people who object to minimum wage are the people who want people to continue working at a pittance for their own benefits. For example, we know that MNCs seek to open their factories in countries where labour is cheap. US has always been accused of double standards or pollutive industries are allowed to be operated in 3rd world countries.

I know these smack of conspiracy theories....but sometimes, you cannot help but wonder

PAP appears now to be unconcerned about national fundamentals anymore. By fundamentals I mean things like social security, progress in income through economic development, plularism of voices, bottom-up policy-making.

Let me explain.

:: Our social security is called CPF but given that this fund is being used by Temasek and GIC to invest and lose big around the world - even as the Ministry of Finance, MAS and the President are completely hands-off about these issue - our social security itself is no longer secure.

:: Progress in income is normal for countries moving up the economic ladder. In Singapore this has been sabotaged by PAP's liberal policy on imported foreign labour. Economic development has become as some rightly pointed out a matter a GDP figure which may have not relation to the progress of income level of Singaporean.

:: Without pluralism of voices, there is only one story in the mainstream media - newspaper, TV, radio. Powerful channels they are and people normally only listen to them; hence they are not well informed about other version of the Singapore story such as this blog represents.

:: Bottom-up policy-making implies that authorities implement policies to facilitate the needs of the market to enable businesses to thrive and consumer to get the best deal.

In Singapore it is top-down decision making with an eye solely on what the government can extract.

Regulations are one source of revenue. Keeping law and order is not longer just that but an opportunity to make regulations so ridiculous that they are nothing but instrument to extort money. A case in point is the near ubiquitousness of ERP gantries.

All in all, while what PAP is practising is probably not seen before in other countries, it is at the same time a Frankenstein created out of various politico-economic systems.

First, it is a centralized political system similar to Communism but not with the kind of low pay their leader have.

Next it is a feudal system which has its tentacles all over the country to extract money from the people through rental of land and other properties.

PAP as you know is into all kind of commercial properties business even as it goes into to every kind of businesses from supermarkets, insurance, taxi, garbage removal ... any business that is profitable.

All the wealth accumulated through such means are held not for the general populace but for its elite and to feed its foreign masters like global banks which in all likelihood the top leaders have a stake in - just like Lee Kuan Yew is the Advisor of CitiCorp.

A decade and a half ago, Paul Krugman, who recently won a nobel prize in economics, wrote the article “The Myth of Asia's Miracle”. The article basically asserts that if you account for Singapore’s growth quantitatively, you will find that it is due to an increase in input, rather than any increase in efficiency. Put it simply, we keep shoveling increasingly more coal to get more fire, but we are not figuring out how to produce more fire with the same amount of coal.He wrote “Even without going through the formal exercise of growth accounting, these numbers should make it obvious that Singapore's growth has been based largely on one-time changes in behavior that cannot be repeated….A half-educated work force has been replaced by one in which the bulk of workers has high school diplomas; it is unlikely that a generation from now most Singaporeans will have Ph.D's. And an investment share of 40 percent is amazingly high by any standard; a share of 7O percent would be ridiculous. So one can immediately conclude that Singapore is unlikely to achieve future growth rates comparable to those of the past…But it is only when one actually does the quantitative accounting that the astonishing result emerges: all of Singapore's growth can be explained by increases in measured inputs. There is no sign at all of increased efficiency. In this sense, the growth of Lee Kuan Yew's Singapore is an economic twin of the growth of Stalin's Soviet Union growth achieved purely through mobilization of resources. …The point, however, is that Singapore's economy has always been relatively efficient; it just used to be starved of capital and educated workers.”Ironically, what is happening today in Singapore validated what he said 10 years ago in a bizarre way. We did find it difficult to maintain the high growth rate, but found a way to keep repeating what was supposedly a one-time change in behavior by importing huge amount of cheap labor from everywhere, for every level. We simply got more and cheaper coal from abroad to keep the fire burning. The question is why don’t we figure out a way to produce more fire from the same amount of coal? Why don’t we move up to the top of the value chain instead of trying to manufacture growth with cheap labor? The answer is because we CAN’T.For the past few years, the biggest winners in the global economy are those with ideas. So you have to be at the top of the value chain. The financial reward to the idea people is huge exponential multiples when compared to the production people. The idea people will outsource the production side to other countries. So it’s like Apple will figure out how to make an phone, but will manufacture it cheaply in China. Singapore, perhaps, gets to the bread crumb job of distributing them in Asia.If you look at the culture, the political system, the educational system of Singapore, you will come to the sad conclusion that we will never be at the top of the value chain. The requisites to be at the top of the value chain require traits like creativity, entrepreneurial, courage, original thinking, and tolerance for uncertainty. These are not traits that Singaporeans have, and to be realistic, will ever have. As they say, we are serious at work, generally efficient, unbending about rules, but afraid of making decisions and mistakes. We will never be the idea people. As such, we will never garner the largest share of the reward. If it is biotechnology, we will be washing test-tubes. If it is banking, we provide the backroom and middle office function. We will always be the production people, the supporting function, the cost center.Unless we can overhaul Singapore Inc, we have to keep importing cheap labor to keep the fire burning. And when we exhaust that option, perhaps we can reintroduce slavery.

You read too much American material. If top American economic thinkers are so great that you think they have wonderful advice for us, then why is their economy in shambles now?

American thinkers by and large are a verbose lot of people who write thick books that say little.

You said : "The requisites to be at the top of the value chain require traits like creativity, entrepreneurial, courage, original thinking, and tolerance for uncertainty.

These are not traits that Singaporeans have, and to be realistic, will ever have. "

What a presumptuous and ignorant thought. Look, what Singapore is today is nothing but a result of entrepreneurship out of no natural resources except may be a strategic location. Singapore has been a trading hub since over 100 years back thanks to local businessmen who know how to make all the right connections.

What is lacking are not those entrepreneurial traits that you talked about. I would forgive you if you never mixed around with businessmen in the market.

But just to help you, every company has it own unique way of business and there are countless permutations involved.

Creativity, entrepreneurial, courage, original thinking, and tolerance, traits which you have mentioned are precisely needed for a business to succeed. The fact that there so many successful local businesses in Singaqpore - despite countless thousands having moved out - just goes to show these are not lacking among Singaporeans.

What is wrong with Singapore is the government which like you tries to deny this reality and when everytime companies complain about escalating cost caused by government policies, the PAP simply sweeps it aside and implement more of such policies.

Hence many companies have fled Singapore.

And who says that a highly-educated workforce is necessarily the way to climb up the economic ladder. Many successful businessmen in fact have low education. And highly educated people work under them as a result.

The minds of these low educated businessmen has the peculiarity of being unfettered by the academic theories and so are freer and more creative in a certain sense.

So don't just parrot academically what you read. That's a sign of a lack of originality.

And I certainly believe that Singaporeans are and can be creative. But perhaps we will need to make more effort (I speak for young people like myself who have gone through 16 years of Singaporean education) to pull ourselves away from the mould that we've been fitted into. Creativity cannot be engineered, as much as MOE is trying its best I'm sure. It is something that surfaces spontaneously when we stop trying to be someone we're not. It is a natural by-product of being confident that we're accepted for who we are - regardless.

Aiya. Folks like KTM wun belive u one lah. even though very expensive Germany & Japan are major manufacturing nations, KTM will still tell u high cost will drive out employers. Cos his econ textbk written by Mankiw says so.

Anyway, I wouldn't ask for gahmen help if I were u. I mean the shipping industry was dying until the gahmen decided it was a "sunset" industry. cue recovery and exiled ex-minister claiming credit. And when we hop into happening industries like semi-con, wealth mgt ... u name it ... eh u really want CPF withdrawal to be 120?

I had been very much impressed by the MSM that Singapore is doing a MUCH better job than that of the other countries, such as USA, in terms of unemployment rate. Now I know that they are comparing Apples to Chicken! I'm getting more and more skeptical about what the say these days.

this time it is diferrent,. we are amongst the big league. There are many more players , all of high calibre. if we don't pull up our socks, and be able and willing, then , better emigrate to a third world country.Many of my mates had seen this coming, and sold out, many moons ago, and now living in comfort and style in Thailand, Phillipines, vietnam etc.

If you walk around the offices you can sometimes see a whole office filled with all foreign workers.

One reason besides lower wages (not always true), FTs are wanted by companies is that they are more amenable having come from countries like India, China, Vietnam, Philippines etc - where societal culture & education are different from ours.

Ours is basically a PAP-structured education system in which there is not much teaching on interpersonal skills like teaching the virtues of modesty or humility but the principal emphasis is almost always on academic grades.

And PAP demonstrates it in no small way by esteeming and employing scholars to fill top positions in the civil service and GLCs.

Hence when a person graduates be it from the U or Poly, he or she might think that's it, I have already made it.

Not really.

Well the working life outside is not just about skills and knowledge, it is very much about relationship how you talk nicely to people, the ability to smile, to take a more relax poise, joke a bit to put people at ease, those kind of things.

These manners don't really take much effort just a matter of habit and not thinking one is being inferior by doing so.

Call a taxi driver boss, your customer sir or madam, an older person Mr, no harm, it won't hurt or belittle yourself. In fact it you do it with a poise (did they teach that in school?), you actually create a positive impression, a professionalism to your trade.

Unfortunately these basic manners are lacking among young Singaporeans thanks to our academic system and PAP arrogant example.

So employers would tend to go for foreign workers who are easier to deal with.

I am not saying all young Singaporeans are like that, just that foreign workers on the whole tend to be easier to deal with from the customer's and employer's point of view.

Like one departmental head in a big MNC told me "Why would I want to employ a Singaporean when a foreign professional would be much easier to work with as a subordinate?"

Like that lor.

The one local race that can compete well on this count are Malay Singaporeans who seem to have a wonderful knack in handling people. I understand many of the call centres & public relation positions in Singapore for example are manned mostly by them.

And so here is competition on this aspect, like it or not, for young Singaporeans.

Take it that one has to improve oneself and one has to break out of the mould that our education and political system has created.

The diagram for minimum wage is correct -- unemployment is the gap created by the minimum wage. In that diagram, the (labor) market is suppose to clear, so without minimum wage, there is zero unemployment in that model.

Not often that Lucky comes up with an intelligent post these days. To be accurate + intelligent + populist is not easy.

The KTM will reserve comment on intelligent. Not very polite to insult the host on his backyard.

Re: accurate, it's not very lah, as the KTM has shown.

Populist, Lucky has always been, so you dun need to worry for him. :-)

And your argument(s) I think belongs to the "trickle down economics" Bush era. You also must evolve lah. Obama era now. Theres really nothing wrong with dole. Helping the less advantaged to their feet. Not a sin. Wun destroy Sinkapoor one. Really.

The KTM hasn't exactly advanced any arguments here. He's merely highlighting that Lucky's supposed model answer as to why minimum wages is not feasible is a tad naive.

There will be a very practical problem of what to do with the people the policy causes to lose their jobs? Tell them "sorry hor, I need to help your other friends get better pay, so you jolly well suck thumb and twiddle your thumbs at home".

Did the KTM say dole is a dirty word? Suppose we pay off their people to stay home and twiddle thumbs at home, we might as well just forget the minimum wages and just take the money that we would need to give out as dole as wage supplements to begin with? Dun need create such huge market distortions (the KTM admits that even giving wage supplements will distort the market to some extent).

On the issue of dole, in case you dunno, it already exists. Dole? What dole you say? Last the KTM counted, there are at least four variants: workfare, SPUR, GST credits and New Singapore Shares. :-)

Paiseh, the KTM is not a mind-reader and he might thus have misunderstood your views on this matter. Does it mean that you are advocating AGAINST minimum wages? If so, why? 'cos you sympathize with the PAP on the problems it will cause? :-)

The posting explains why the PAP cannot introduce minimum wage because there are too many people earning horribly low wages.

The KTM is here to clarify that you have no understood the situation. It's because minimum wages will (i) distort the market (causing possibly unintended consequences), cause people to get unemployed and there's no good way to help them?

If you want to give the people who lost their jobs money, they why not just give wage supplements instead of implementing a minimum wage policy? Perhaps they will be both better off and get to keep their dignity of at least having a job. :-P

If the KTM is confused about your intentions above and you actually WANT to implement minimum wages, then tell us: how much would you set the level of minimum wages at? $1,300, $600 or $330? And why?

Do you understand how minimum wages are set in other countries? If we follow the minimum wage policies of other countries (as a percentage of median labourer wages), do you know what that level will be? Will it therefore solve our "poverty" problem as you say?

The pre-conditions to do it does not exist in Singapore. Like I said it will problematic if the PAP govt introduces minimum wage.

The KTM will claim that there are no such pre-conditions. If you claim there are pre-conditions, then tell us: what are they? Did the other countries that have implemented minimum wages also meet your preconditions before they implemented the policy?

If they are foreign companies here for cheap labor, they will run....what else do you expect.

Did you do your homework before you talk? What is the sorts of jobs generated by the MNCs in Singapore? Do you think they generally pay above $1,300 or below $1,300? Do you think they will be much affected by the minimum wage policy?

That is why it is critical to develop home grown industries and industries that are able to pay labor wages that what it cost to live in Singapore.

What makes you think the local enterprises won't move out of Singapore if the conditions in Singapore are unfavourable? Pls do not pretend to think like the businesses when you clearly lack the capacity to do so. :-)

The fact the govt is terrified they will run if there is a minimum wage, tells you what kind of businesses are operating here.

Brilliant. Sound exciting. So tell us: what are the businesses operating here that the Government is so ashamed of? Let's expose them for the world to see. The KTM likes scandals too. :-)

First enacted in Australia and New Zealand in the late nineteenth century, there is now legislation regarding minimum wage fixing in more than 90% of countries. Looks like we are the exception along with Myanmar, Nigeria and whatever....

So? We're slow and so what? :-) You forgot to mention we're also one of the few countries left that execute drug traffickers.

As for Singapore creating problems for itself with minimum wage...please lah KTM isn't that what my article is about?!!! That it is problematic to implement minimum wage in Singapore.

Let's have no confusion. The KTM agrees with you on this point. Your perspectives are however a tad shallow and the KTM is merely trying to be a helpful kaypoh. :-)

I see KTM is doing his usual - nitpicking and criticising...and when I read his blog , I realise he's a great one to talk! He sounds like a lazy blogger who doesn't do his own homework and gets a kick out of putting down people who have a different view from his. I agree with King Greg's and other anonymous' views of KTM. He's probly a middle mgt type or a senior civil servant who's too afraid to rock the boat. Lucky, you should just ignore KTM cos he doesn't deserve a reply. Too full of himself to accept any other view point except his own no matter how good your reply is. He'll just continue to reply in his usual arrogant and rude manner..he probly thinks he's LKY the second..lol !

same anonymous at 9:03 pm. Noticed too that KTM either doesn't understand Lucky's post or pretends not to understand and throws in all kinds of irrelevant questions and accusations with his smart-alecky tone. Probly bored cos no one's reading his blog so he comes here to create traffic for himself or just being a troublemaker here as someone else noted... KTM - go get a life ! If we want to hear your views, we'll read your blog. Don't spoil it here for Lucky Tan with your irrelevant and shallow views altho u try hard to sound smart. Too bad for you, we know u are not ! Go back to frying your kway teow !!

I wrote a lengthy and detailed post at my blog on the possible economic consequences of having a minimum wage in Singapore. Well the thing is, while people like the KTM (who has a irritating illeist tendency) like to dismiss arguments for the minimum wage as being straight-forward bad for the economy and employment, the truth is far from being that simple.

Despite what many think, it's not automatically true that a minimum wage would necessarily increase unemployment. That is true under the commonly held and assumed framework of perfect competition, upon which the graph in your blog is based.

But once you consider imperfect labour markets in the real world, it's entirely logical to believe that a minimum wage might have a positive or zero effect on employment. In particular, under the assumption of a monopsonistic employer market, a minimum wage can actually increase employment.

I know I shouldn't but I can't help scanning through your posts (and stopped at this one) while at work. Yes, it's office hours over here in London.

I had this interesting discussion with Wife over dinner yesterday about how easy it is to get a PR in S'pore. We know of an Australian who was sent a PR application form just after working 6 months in S'pore a couple of years back. Yep, you read that right, just 6 months.

Over here in the UK, I have to work continuously for 5 years to be eligible. And all this while, I will be paying higher taxes as compared to back home. This taxes goes into supporting the welfare of the local populace.

And if you are wondering how we come to know of the Australian who was offered a PR-ship.... he was scoffing of it publicly in the office over here. Needless to say, he didn't take it up and hop to London thereafter.

Will be discussing about this in my next post and will of course link to your site.

To the gentlelman who must have believed that he found the gospel truth:

"You read too much American material. If top American economic thinkers are so great that you think they have wonderful advice for us, then why is their economy in shambles now?"

Paul Krugman was just stating the basic economic principals,he wasn't offering some great economic thinking leh.

Paul Krugman has repeated that economic growth of any country depends on 3 critical factors:they are input of labours,capital and increase in productivity,period.

For any normal country which aspires for economic growth,the first two factors are definitely limited,politically,it is impossible to increase the labour force and capital indefinitely.and the only way to grow the economy is by way of productivity gain which is very hard to come by and which defines whether a country is truly WORLD CLASS or NO CLASS!

Alas,this great economic thinker does not know that Singapore is no normal country,it has a problem in producing babies but it has also the highest population growth in the last few years for the whole world,it was around 4-5% last year,the sparesly populated Dubai lagged behind with 3.3%.

Increase in capital?also not a problem with PAP,the wealth of the nation is basically concentrated in one single pair of hands,and my own estimate is around S$ 1 trillion,which have been punted wildly into all sorts of investment,especially during the last 10 years.

What about gain in productivity?oh,that is difficult and need lots of hard work,is that PAP's style?Of course NOT,PAP always believe in short cut and quick fix-the max party gain in the min amount of time,or else how you prove that you are extremly brilliant and capable?so what is our productivity gain,probably the lowest in the whole OECD and more.

The two most important factors for any biz operation are labour cost and rental.

While PAP takes it upon itself to ensure that Singapore citizens and its imported cheap foreign labour are underpaid,it also takes it upon irtslef to lift the rental charges,and takes great credit for it.

Or else the mulit-million PAP ministers who generally have little or nil biz experience do not know the word:Oxymoron -

Singapore government is very rich as the wealth of the whole nation is concentrated in one paor of hands,and yet PAP sees it fit to open this little red dot to foreign investment in property,that is Oxymoron to me.

Of course there is no doubt that PAP score high mark even with SMEs,those biz people who struggle to keep their biz going,on the other hand,most of them do achieve instant self actualization when they look at the properties that they have invested,and console themselves that PAP is not all bad.

But pl ask yrself,is this the way to build a nation of successful enterprises???

That was a pretty comprehensive writeup on your blog! If our labor market is a monopsony, the benefit of minimum wage is clear. In fact that is one of the key motivation for a minimum wage in the ILO documents ILO Minimum wage doc

However, in Singapore low wages cuts across so many occupations and employers. The number we are talking about is in the 300,000...20-30% of workforce. Setting a minimum wage of say, $1800-$2000, may have a impact on employment. When the Taiwan revised recently the minimum wage, the impact on employment is expect to be small because only 3-7% of the people are below it.

We have to get our income gap down by a lot before we can do this and get benefits from doing this. We just cannot do it with our income gap & high cost of living.

::::Lucky, you should just ignore KTM cos he doesn't deserve a reply. Too full of himself to accept any other view point except his own no matter how good your reply is.::::

Actually I'm trying very very hard to understand his point he is driving at. The basic logic of the original posting is very clear and simple. The conclusion that Singapore cannot have minimum wage because of its impact on employment is also something he agrees with.

I think he saying "its not the govt's fault, they have done the best" or something. But when a govt calls itself extraordinary and pays itself the highest salaryin the world - it is hard for them not to be accountable. KTM, I would say is a genuinely understanding citizen. I'm "more demanding"....

KTM,You always escape saying that you are confused but yet you never ask yourself if people are confused by your nonsense. No one here can relate to what you say because you are amazingly extraordinary out of this world just like our ministers.

Perhaps it will be better for you to stick to frying Kway Teow than to give nonsensical comment.

The problem is our garment only do something when it is too late.For EG like When their favourite indonesian FT Mas Selamat escape.

Pushing Minimum Wage will at leastmake them acknowledge the fact that the streaming system(that they implemented) have systematically created a under caste of citizens who have trouble looking for jobs when times get tough.

Hiding behind the fact that PAPer social engineering have gone awry will only make more people apathetic to the well being of the whole society.

Actually we used to have Collective Bargaining in the past.But then some one decided to form a Fake Big Umbrella Union (one ring to rule them all) that cannibalized small shops, insurance, part of the health care service and then some.It is because of the Fake union (PAPer tigers) that workers interest in Singapore is undermine systematically.

What the need for setting minimum wage can when you can freely give out employment pass or PRs to FT willing accept this kind of pathetic pay. In long run it is cheaper and population will grow and the government can benefit from the GST collected from the expenditure in Singapore.

Hell to singaporean citizen. If u don't like you can always migrate no one is stopping you. I can always import more citizen elsewhere that is happy to stay in Singapore even with punitive pay.

The government has problems creating a decent number of good jobs. It's not that they never try. They just are not very good at it. Take their latest attempt, the biotech industry.

I heard that the biotech industry is now facing more problems. Funding for research is now cut and downsizing is to be expected at the bio-related A*STAR institutes. Hopefully, biotech will not be abandoned like the numerous 'hubs' before. Many test-tube washers have gone to take PhDs, it will not be nice for them to return to no jobs.

Now they are trying to promote media and gaming. Their approach is still business-centric. They are throwing money at any company with a half-baked proposal, in an attempt to establish an industry here. Let's see how successful that is.

I thought it was q-on-q. With the volatile biomedical sector contributing to the bulk of the growth. Take this away, it shows the overall economy has stabilised and most likely a slow recovery will begin.

You quoted some statistics in your post and reply regarding the distribution of low wages amongst the popoulation. Just wondering where you got those stats from? I'd like to look at it in detail myself. Thanks.

I do agree there's too large a gap between the various social classes in our society. That's the main reason why Singapore has such a high Gini coefficient. On the other hand, I do wonder at times if there is evidence that the income groups are mobile; whether we have evidence that lower income groups do in fact move out of their lower societal status ranking to higher classes, or they are largely stuck in a cycle of poverty. If the latter is true, then it may be worth enquiring why so.

Social mobility has probably decreased as the income gap ballooned and poverty become more entrenched. For example, the majority (or a disproportionate number) of PSC scholars are from private homes. Philip Yeo revealed the statistics in one of his speeches.

Limiting the downside of poverty - ensuring people who are down and out still have easy access to medical care, education, basic needs etc will increase social mobility. But the PAP approach is minimalist - when poor people cannot make ends meet and pay for the electricity, the approach was to install a cash card meter to limit their use of electricity. The PAP govt ups the HDB rental of poor people as their incomes go up so they will never be able to breathe easier financially. The approach is to prevent abuse, give minimal and take back as much as possible. It is never about meeting needs and what is best to done to elevate people from poverty....the fear of abuse prevents the govt from doing so and the put in place cumbersome rules, checks, and numerous hinderance to those seeking aid. That might have been okay when our income gap was still low, but doing it now when this gap is so large makes no sense.

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